First Quantum Minerals vs. Eurasian Natural Resources

Abstract

The case describes the battle between First Quantum Mineral (FQM) and Eurasian Resources over mines in Democratic Republic of Congo (DRC). After FQM's license to operate was revoked by the government of the DRC, Eurasian bought the rights over the mines that were previously under FQM's control raising questions about the effectiveness of corporate governance at Eurasian.

An increasing number of companies make sustainability investments, and an increasing number of investors integrate sustainability performance data in their capital allocation decisions. To date however, the prior academic literature has not distinguished between investments in material versus immaterial sustainability issues. We develop a novel dataset by hand-mapping data on sustainability investments classified as material for each industry into firm-specific performance data on a variety of sustainability investments. This allows us to present new evidence on the value implications of sustainability investments. Using calendar-time portfolio stock return regressions we find that firms with good performance on material sustainability issues significantly outperform firms with poor performance on these issues, suggesting that investments in sustainability issues are shareholder-value enhancing. Further, firms with good performance on sustainability issues not classified as material do not underperform firms with poor performance on these same issues, suggesting investments in sustainability issues are at a minimum not value-destroying. Finally, firms with good performance on material issues and concurrently poor performance on immaterial issues perform the best. These results speak to the efficiency of firms' sustainability investments, and also have implications for asset managers who have committed to the integration of sustainability factors in their capital allocation decisions.